Publishers ponder pending postal increase

Published on July 10, 2006.

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Question: What do you do with a 500-lb. gorilla in the room? Answer: Coexist, but carefully. That about sums up b-to-b publishers' approach to postal costs, with the latest in a continuing series of rate hikes proposed by the U.S. Postal Service in May.

"Higher postal rates are kind of like the smog level or sunburn index. You still have to go outside," said James Malkin, chairman-CEO of SourceMedia. "We try to increase our yield all the time, but you still have to deal with it."

Malkin said SourceMedia next year will continue to publish digital editions of some titles and probably expand its electronic newsletters. Even so, he said, "a lot of people still like reading our material in print, and postal is just a cost of doing business that we have to budget in."

Penton Media CEO David Nussbaum acknowledged that there's only so much his company can do. "It's not like the Postal Service is just another vendor that we can negotiate with," he said. "I think American Business Media has done well to mitigate the damage, and next year we'll all just try to live with the higher costs as best we can."

Meanwhile, Penton now produces three digital-only titles and offers about 20 digital editions of print magazines. "Digital production technology continues to get better, and the open ad rates for digital editions are also improving," Nussbaum said. "But only a small minority of our readers actually prefer digital-only delivery. I think those numbers may increase in time as demographics change, but it's too soon to tell."

Similarly, Ascend Media now offers two digital-only properties, both of which have significant overseas distribution. But president-CEO Cameron Bishop is unsure of either their lasting appeal or how much the company should budget for future development. "We see strong early interest in these vehicles followed by a falloff," Bishop said. "So far, we haven't seen anything yet that tells us that this is something we should be into in a big way."

One of the kings of Web offerings and electronic newsletters, CMP Technology may have wrung nearly as much efficiency as it can from digital alternatives that avoid higher postal expenses. "We've enjoyed several good years of controlling our circulation development costs," said CMP President-CEO Steve Weitzner. "To a large extent, we've used e-mail and online registration to replace, or reduce, direct mail and telemarketing. But these options may now be peaking, too. So we may have another cost headwind in the making."